QAISER AZEEM vs The COMMISSIONER INLAND REVENUE, RANGE-I, ZONE SOUTH, RTO, ISLAMABAD Ss

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QAISER AZEEM VS The COMMISSIONER INLAND REVENUE, RANGE-I, ZONE SOUTH, RTO, ISLAMABAD Ss. 41 & 111(1)(d), proviso---agricultural land within Islamabad Capital Territory---agricultural income---Whether liable to tax or not---Expression "paid tax under the provincial law"---Effect---Whether the agricultural income earned by the taxpayer from land situated within Islamabad Capital Territory is subject to income tax under the Income Tax Ordinance, 2001---Held: Section 41 of the Income Tax Ordinance, 2001, clearly provides an exemption for agricultural income; however, this exemption is subject to the application of S. 111(1) of the Ordinance, 2001, which carries the key phrase as "paid tax under the provincial law"; thus, refers to agricultural income tax levied by the provinces---However, in the present case, the appellant's agricultural land is not located within the jurisdiction of any of the provinces of Pakistan---Instead, the land is situated within Islamabad Capital Territory, which does not fall under provincial control---Significantly, there is no existing law that imposes agricultural income tax within the boundaries of Islamabad Capital Territory---Unlike the provinces, which are empowered to levy agricultural income tax under their respective laws, Islamabad Capital Territory is governed by federal law and no corresponding federal legislation has been enacted to impose such a tax---Consequently, the agricultural income derived from land within this territory cannot be subject to agricultural income tax, as no mechanism or law exists to impose or collect it---Since no tax is payable under any provincial law due to the specific location of the land, the proviso to subsection (1)(d) of S.111 of the Ordinance 2001, which concerns unexplained income or assets, does not apply---Thus, in the present case, income-in-question is explained and fully accounted for and is not subject to taxation under the law---Importantly, even the tax department had not asserted that the appellant's agricultural land was located within the jurisdiction of any province, which would make it subject to provincial laws regarding the levy of agricultural income tax---If the department had claimed that the appellant's land was situated in a province, the appellant would have been liable to pay agricultural income tax in accordance with that province's tax laws, however, since no such claim had been made, and the land was within Islamabad Capital Territory, where no provincial laws apply, the imposition of agricultural income tax did not arise in the present case---Therefore, the tax demand created by the assessing Officer was not sustainable in law---appellate Tribunal Inland Revenue deleted the addition made by the assessing Officer and annulled the orders of the tax authorities---appeal, filed by taxpayer, was allowed.

QAISER AZEEM vs The COMMISSIONER INLAND REVENUE, RANGE-I, ZONE SOUTH, RTO, ISLAMABAD Ss — 2026 PTD 724 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN

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